WASHINGTON — A Republican political consultant acknowledged Tuesday that he used his influence to obtain a $43-million Department of Housing and Urban Development rehabilitation and rent-subsidy grant for a developer client, but he insisted that he acted "within the system."

The testimony by Paul Manafort at a sometimes stormy hearing of a House Government Operations subcommittee came after local officials from New Jersey who were affected by the HUD decision complained that they were never consulted in advance about the grant and did not want it.

Manafort's high-powered lobbying and public relations firm received a $326,000 fee for its work in getting HUD approval of the grant largely through personal influence with Deborah Gore Dean, an executive assistant to former HUD Secretary Samuel R. Pierce Jr., he said.

Became Partner

Later, Manafort became a 20% partner in the development firm that acquired the 326-unit apartment project that benefited from HUD's grant to provide improved housing for low-income people. The firm bought the units in the Seabrook subdivision of Upper Deerfield, N.J., two weeks before the New Jersey Public Housing Authority was notified that HUD had approved the funding.

Manafort said that Lawrence Gay, an associate in his consulting firm, talked to Dean on Nov. 14, 1986, about the grant and told her that it had the support of the New Jersey housing authority. She asked that agency to file an application. Six days later, at the urging of another of Manafort's associates, New Jersey officials complied and the grant was approved by HUD the following February.

"A very smelly, sleazy business," said Rep. Christropher Shays (R-Conn.). "I feel it wasn't a meritorious project. People who knew how the system worked were able to get their project approved even if it wasn't meritorious."

Manafort, a former Republican campaign adviser, replied: "We worked the system as it existed. I don't think we did anything illegal or improper."

$1,000 an Hour

At one point, Manafort said that it was logical to infer that his firm charged $1,000 per hour for its work on a project involving low-cost housing and low-income people that he said came to about $100,000 a year for three years.

"By Washington standards, that is not very high," said Manafort, who has never visited the New Jersey housing site. He said that his consulting firm normally accepts clients only if they pay a $250,000 annual retainer.

Previous witnesses before the subcommittee have testified that Pierce controlled grants for a moderate rehabilitation program through his office, with Dean playing a central role. Dean invoked the Fifth Amendment privilege against self-incrimination when she was subpoenaed by the House panel, but she indicated that she may testify later if she gets access to HUD documents about the program.

Officials Not Consulted

Unlike another celebrated case in which former Secretary of the Interior James G. Watt received a $300,000 fee for obtaining a similar grant for an Essex, Md., low-income housing project, however, local officials were not consulted and did not back the proposal.

Bruce T. Peterson, the mayor of Upper Deerfield, said that neither he nor his predecessor was consulted about the rehabilitation plans and were not informed by the state housing agency when the grant was made.

Most of the units, originally constructed during World War II as temporary quarters for farm workers, were in such bad condition that they should have been torn down rather than rehabilitated, Peterson said.

In addition, the rents proposed for the renovated units are much higher than for comparable apartments in the area, he said, with a corresponding increase in the amount of federal subsidies that HUD will have to pay to supplement the partial rents paid by low-income residents.

"I think it's a horrible waste of taxpayers' money," Peterson said, adding that he would rather have received half of the $43 million to spend as the community wished on low-income housing.

Manafort insisted that the mayor did not understand the program. He said that his development firm took a risk by buying the Seabrook apartments because the New Jersey housing agency advertised for other bidders.

One Ad Placed

Members of the subcommittee, however, noted that a single ad was placed in the Millville (N.J.) Daily on May 18, after Manafort's firm had acquired the property and less than two weeks before Manafort's firm was awarded the rehabilitation contract on June 1.

"This was a sham and illusion that this was publicly advertised," said Rep. Tom Lantos (D-San Mateo), the subcommittee chairman.

Rep. Charles E. Schumer (D-N.Y.) put it more bluntly, telling Manafort: "They could have cut out all this language and written: 'The fix is in.' "